Economics and The Idea of Natural Laws

Economics and the Idea of Natural Laws
Author(s): O. H. Taylor
Source: The Quarterly Journal of Economics, Vol. 44, No. 1 (Nov., 1929), pp. 1-39
Published by: Oxford University Press
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THE
QUARTERLY JOURNAL
OF
ECONOM ICS
NOVEMBER, 1929
ECONOMICS AND THE IDEA OF

NATURAL LAWS
SUMMARY
I. Dubious notions suggested by eighteenth- and nineteenth-century
conceptions of the "laws of nature" are being discarded from natural
sciences, and should be discarded from economics, 1. - II. Evolution
of the idea of natural laws, since the seventeenth century; in the
natural sciences, "mechanical philosophy," belief in harmonious Order
of Nature, fatalism, and the modern view that scientific laws may be
only statistical laws, 6. - III. Corresponding evolution in economic
thought. Eighteenth-century moral sciences mechanistic, but not
rigidly deterministic. Economic optimism and fatalism. Modern view
of the nature of economic laws, 16. - IV. Economic tendencies are
toward adjustment, but not necessarily any ideal adjustment. Social
welfare depends on human motives and on institutions. This was
recognized in eighteenth-century philosophy of the moral " Law of
Nature" (jus Naturae), accepted by Physiocrats and Adam Smith, 34.
I
ECONOMICtheory of the traditional type has always
purported to be a "scientific" statement of the most
general" laws" of society's economic life. Not long ago,
respectable economists were still boldly calling these
"laws" of their science "natural laws" or "laws of
nature." But the idea of natural laws, which so largely
dominated scientific and philosophical thought in the
eighteenth and nineteenth centuries, has in recent dec-
ades lost something of its former freight of meaning,
and perhaps of its former prestige. Philosophers have
1

2 QUARTERLY JOURNAL OF ECONOMICS
been criticizing the notion which the phrase conveyed

to the nineteenth-century mind, and especially the
uses that were made of it in psychological and social
"'sciences" ; and even physical scientists have been
revising their conceptions of the nature and significance
of scientific "laws." ' The laws which the natural
sciences discover are still called "laws," but there is a
disposition, perhaps growing, to stop calling them "laws
of nature," on account of the dubious inherited con-
notations of that phrase. At all events, whatever
terminology is employed, there is at least a new scep-
ticism toward some of the notions which the general
idea of laws of nature carried with it in the mid-nine-
teenth-century mind. The tendency of present-day
economists, even of the more "orthodox" type, to speak
with more modesty and caution about the "laws" of
their own science, and to drop all rhetorical language
about the "natural laws" of economic life is thus in
harmony with current tendencies in other sciences.
1. P. Struve, in his article "L'id6e de loi naturelle dans la science 6co-
nomique" (Revue d'6conomie politique, 1921), refers to Windelband and
Rickert, and the earlier work of Renouvier, as having specially contrib-
uted to the modern critical revaluation of the idea of scientific "laws."
Windelband and Rickert have been especially concerned with criticism
of attempts to apply it in historical and social studies. E. Boutroux,
working in the general tradition of Renouvier, has written keenly on the
nature of laws in science generally. A. N. Whitehead, Bertrand Russell,
and some other English philosophers have, I believe, attacked the prob.
lem on rather different lines. An indication of the present state of the
discussion in physical science may be obtained from A. S. Eddington's
The Nature of the Physical World (1928).
The article by Struve, referred to here, and again below in the text, dis-
cusses brilliantly some aspects of the problems considered in the present
article. But my approach is different, and my indebtedness to him is not
great. I should perhaps apologize for the accidental similarity of my
opening remarks to his, which seemed inevitable.
2. "The conception of the 'working hypothesis,' provisional, ap-
proximate, and merely useful, has more and more pushed aside the com-
fortable 18th-century conception of 'laws of nature."' - Bertrand
Russell, in Preface to H. Poincar6's Science and Method, trans. Mait-
land, p. 6.

ECONOMICS AND THE IDEA OF NATURAL LAWS 3
But the matter still needs a more definite clearing up.

What is the exact nature and significance of the "laws"
at which economic theory arrives? Exactly what and
how much of all that was involved in or suggested by
the old idea of them as real "laws of nature" do we need
to discard? A clear answer to this last question, if it
could be given, would do much to put an end to the con-
troversy that has dragged on for a century, between the
adherents of "theory" of the more "orthodox" type
and the "rebels" who have wanted to turn economic in-
quiries in some wholly different direction. The latter
have generally been men who were alienated by some of
the apparent implications of the traditional idea of "na-
tural" economic laws. They have regarded that idea,
and the scheme of thought bound up with it, as the un-
alterable essence of "orthodox" theory, and hence have
wished to abandon such theory entirely. But the ma-
jority of modern adherents of "theory" of this type, are
ready to concede that its "laws" are not all that the
older economists, who called them "laws of nature,"
thought they were. The way would seem to be open for
an attempt to "get together" on the basis of a clearer
separation of the valid from the invalid or dubious ele-
ments in the philosophy of the older economists.
The best way to solve the problem would probably be
to make a thoro philosophical and critical study of the
historic evolution of the theory of economic laws. Cri-
ticism of the notions of the older economists must be
based upon a real knowledge and comprehension of
them; and this can come only from a study of their
origins and development and of their setting in the life
and thought of the times. This approach is all the more
indispensable because of the fact that the notions here in
question - namely, those connected with the particular
significance then attached to the idea of "natural laws,"

in the minds both of economists and of contemporary

workers in other sciences - were not adequately
thought out and expressed by anyone, but were merely
an elusive part of the "mental climate" or "atmos-
phere." 3 The student must undertake the dangerous
task of making fully "explicit" ideas which in part are
merely "implicit" in the writings of the Physiocrats, of
Adam Smith, and of the classical economists; for with-
out making them more fully explicit than they are in
those writings, it is impossible to criticize them intelli-
gently. This undertaking would be a dangerous one in
any case; but a sufficient knowledge of the development
of the whole outlook and philosophy of the epoch might
make it possible to penetrate to the half-hidden founda-
tions of its theory of the "natural" organization and
laws of society's economic life, and then to separate what
was soundly "scientific" in that theory, according to
modern standards, from what was merely dubious and
misleading speculation.
Numerous scholars have, of course, made historical
studies covering some of the ground that needs to be
covered. Some American readers will think at once of
Thorstein Veblen's contribution.4 But this, brilliant as
it is in its way, can hardly be supposed by any one to
rank as a serious piece of historical and critical scholar-
3. Whitehead (Science and the Modern World, pp. 4, 5, 10, 11, and
passim) emphasizes the importance of the "climate of opinion" and the
"secret imaginative background" which colored the fundamental con-
ceptions of the creators of modern physical science. Possibly this was
even more important in the case of the pioneers in economics, who were
less closely tied down, so to speak, to perfectly definite facts, and who
were not yet thinking in terms of mathematics. But I do not think this
influence of half-hidden "preconceptions," to use Veblen's term, upon a
writer's theories, means that they are wholly a mere product of an his-
torically transient intellectual and social environment, and contain no
elements of permanently valid "truth."
4. 1 refer, of course, to The Place of Science in the Modern World, and
Other Essays, especially the essay on "The Preconceptions of the Older
Economists."

ship. It is an impressionistic and polemical sketch, and

is, I believe, biased by a serious misunderstanding of the
ideas of the older economists. Of more importance are
the studies of several European writers. The work of
Neumann 5 is, of course, a classic in the field; but its
historical part is subordinate to his critical discussion of
the relation (of resemblance or difference) of economic
laws to the laws of the natural sciences; and this, I
think, is only a part of the problem. Hasbach's mono-
graph on the "philosophical foundations" of the teach-
ings of Quesnay and of Adam Smith,6 reflects much
careful research; but is concerned with other problems
in addition to the special one of understanding and
criticizing their conceptions of "natural laws," and
therefore does not deal as directly or as adequately with
that problem as could be wished. P. Struve, a Russian
scholar, in a brilliant article in the Revue d'economie
politique,7 has applied the ideas of neo-Kantian phi-
losophy to a critique of "l'idee de loi naturelle dans la
science economique," whose historical development he
outlines. Other studies might be mentioned.8 But no
one seems to me to have dealt with all of the important
5. F. J. Neumann, " Naturgesetz und Wirtschaftsgesetz," in Zeitschr.
fur die ges. Staatswiss. (1892). Also " Wirtschaftliche Gesetze nach-
frtihere und jetzige Auffassung," in JahrbUcher fur Nationalikon. u.
Statistik (1898), 3rd series, vol. xvi. The former of these monographs
is praised by Marshall, Principles of Economics, footnote, p. 33.
6. W. Hasbach, Die allgemeine philosophischen Grundlagen der
von F. Quesnay u. A. Smith begrtindeten Politischen Okonomie (Leipzig,
1890). I owe a good deal to this work, and something also to the same
author's Untersuchungen uiber A. Smith.
7. See note on p. 2 above.
8. The Revue d'6conomie politique has published a number of good
articles on this subject, and others close to it, of which I note the follow-
ing: B. Raynaud, " les discussions sur l'ordre naturel au xviiie siecle,"
vol. xviiii (1905); E. Allix, "Le physicisme des Physiocrates, " vol. xxv
(1911) - a particularly excellent article; and the same author's "Des-
tutt de Tracy, economists," vol. xxvi (1912), which has little on econo-
mic laws, but shows how this ideologist connected a quite orthodox type
of theory with his system of psychology and its mental "laws."

aspects of the history and meaning of the idea, or to

have attained the point of view from which all of its
aspects can be simultaneously grasped, and therefore
properly criticized.
The present article attempts no more than to make
suggestions in this field of inquiry. It does not, of
course, pretend to be even a part, however small, of the
adequate historical study which I have called for. It is
rather a preliminary survey of the ground and the prob-
lems, and an effort to indicate some very tentative
conclusions.
II
The belief that all events, including human actions,
are subject to strict "laws of nature" can be traced
back to antiquity, and has played an important role in
the philosophies of at least some leading thinkers in
nearly every epoch in the history of European thought.9
But in the seventeenth century, it attained a somewhat
new prominence, a new and more definite shade of mean-
ing, and a new fruitfulness for scientific thought, which
have made it a main element in the scientific mentality
of the last three centuries. In the eighteenth century,
the idea pervaded all disciplines, including the "moral"
or psychological and social as well as the "natural"
sciences.' In the course of the nineteenth century, its
9. A good brief survey of the history of the notion, from antiquity
down, is given by R. Eucken in Main Currents of Modern Thought,
trans. M. Booth (New York, 1912), art. "B. 3-Law." Windelband's
History of Philosophy has brilliant sections on the r6les it played in
ancient, medieval, and seventeenth- and eighteenth-century thought.
The first chapter of Whitehead's Science and the Mod. World is sugges-
tive on the probable nature of the debt of modern science, for its con-
ception of strict laws of nature, to ancient philosophy and even to
medieval theology.
1. I cannot crowd much evidence in support of this statement into a
footnote. Some evidence is given in the text and notes below. Standard
histories of philosophy that deal extensively with the seventeenth and
eighteenth centuries recognize the prevalence, especially in the latter,

sphere gradually became limited, in effect, for many

minds, to the natural sciences. Students of the social
sciences became conscious of difficulties in the way of its
use in their field, of which the eighteenth-century mind
had been less acutely aware.2 This was due, I believe, to
an important change in the connotations of the idea.
Even in the history of the natural sciences, since the
early seventeenth century, the content of the general
belief in "laws of nature" has been slowly changing.
Throughout the whole period of three centuries, it is
true, the idea in this field has implied the doctrine of
determinism; and it is almost certain that a "mechan-
istic" metaphysics or cosmology has lurked somewhere
in the background, when not explicitly accepted as the
starting-point, of scientific thought.3 The seventeenth-
century pioneers who* created classical physics con-
ceived the physical universe as almost literally a 'ma-
chine"; a mass of particles of matter spread through
space and perpetually moving and impelling one an-
other to move, in accordance with the laws of me-
chanics. Robert Boyle, the great pioneer chemist,
adopted the "mechanical hypothesis" as the basis also
of efforts to discover and formulate, and of the belief in, natural (causal)
laws of human action (psychological and social laws); Windelband,
H6ffding, L6vy-Bruhl, and others. Condillac in France, and Hartley in
England, started the most definite systems of psychology, on this basis,
on lines suggested by Hobbes and Locke. All the French philosopher -
Diderot, D'Alembert, Condorcet, Helvetius, Holbach, and the rest
were full of the idea; and Hutcheson, Hume, Adam Smith, and others
had it, tho they did not parade it so much.
2. I do not mean that talk of "social laws," historical laws, and the
like, became less prevalent; it became steadily more prevalent. But I
think the efforts which this came to involve, to assimilate social science
more completely to the character of natural science, and the simulta-
neous decline of the old religious "humanization of nature" as it has
been called, combined to produce an increasing dissatisfaction with the
whole proceeding. This is not the kind of thing that one can prove by
a few citations in a footnote.
3. Windelband, Whitehead, and many others stress the importance
of the "mechanistic" assumption.

of his own science, and defended it in voluminous es-

says.4 Most of the students who were advancing the
various biological sciences also adopted it, and regarded
the bodies of animals and men as "machines." I In the
eighteenth century, the idea was almost universally
accepted. The whole universe, including living or-
ganisms, was pictured as a vast "machine," whose
operations are all explainable and predictable by the
laws of mechanics.6 And the doctrine of mechanistic
determinism has remained until very recently a first
article in the creed of the natural scientist.
In the eighteenth century, however, this idea was still
combined with the theological idea of an harmonious
"Order of Nature," in which every thing or being has
a definite, ideal function to fulfill in the wisely planned
economy of the cosmos. The world-machine was ad-
mired as a wise contrivance of the Deity for causing
every part of the whole to fulfill its function. Hence the
"laws of nature," tho conceived as laws of mechanical
causation, were also and at the same time conceived as
" canons of conduct" providentially imposed upon
things. E. Mach, the great historian of the science of
mechanics, has shown how eighteenth-century phy-
sicists, who followed up and completed the work of
Newton, were often actually led to their formulations
of the laws of mechanics by setting out from theological
4. R. Boyle, Works (ed. of 1744, in 5 vols), iii, 450 Sf. This particular
essay is entitled "Of the Excellence and Grounds of the Corpuscular or
Mechanical Philosophy." Half the titles in the five vols. contain the
word "mechanical."
5. H. Driesch, History and Theory of Vitalism, trans. Ogden (1914),
pp. 22 if.
6. E. Mach, The Science of Mechanics, trans. McCormack (Chicago,
1893), pp. 463, 464. "The French encyclopedists of the eighteenth cen-
tury imagined that they were not far from a final explanation of the
world by physical and mechanical principles; . . . the world-concep-
tion of the encyclopedists appears to us as a mechanical mythology in
contrast to the animistic."

postulates about the wisdom, simplicity, economy, and

harmony of the "plan" of nature's operations. The
laws, Mach says, were valid, and were afterward re-
stated so as to get rid of the theological implications.7
In the course of the nineteenth century, the notions
summed up in the phrase "the Wisdom of Nature"
were gradually discredited, and more or less completely
eliminated from scientific thought. Eventually the
theory of evolution came along, to explain the adapta-
tions or harmonious adjustments found in nature as
products of a blind historical process of "natural selec-
tion "; and this theory also emphasized the imperfection
or incompleteness, at every stage of the probably eternal
process, of the resulting "harmony." The conception
of natural laws as providential ordinances for maintain-
ing harmony in the universe, faded away, and all that
was left of the idea, was the doctrine of determinism.
The beautifully harmonious world-mechanism of the
eighteenth century's imagination became the blind,
ruthless, purposeless mechanism which oppressed the
imaginations of so many nineteenth-century poets and
philosophers.8
7. E. Mach, op. cit., pp. 440-465. The great historian of this funda-
mental natural science here gives what is surely one of the most illum-
inating discussions to be found anywhere of its early relations with
theology.
8. A perfect picture of a mind that had only half completed this
transition is afforded by Huxley's famous lecture on "Evolution and
Ethics " (Evolution and Ethics and Other Essays, N. Y., 1909). Huxley
upholds the idea of an Order of Nature, in which parts are made to func-
tion harmoniously in the life of the whole. But he finds that in the or-
ganic world, the harmony is marred by the presence of pain, "a baleful
product of the evolutionary process," and by a complicated struggle that
is most intense in the soul of man and in society. He goes on to argue
that the "ethical process" in society, tho it is a product of, is yet in con-
flict with, the "cosmic process"; an ethical civilization is built up not by
"natural" forces (which he takes to mean the forces of man's lower
nature), but by unceasing "artificial" resistance to such forces. He
therefore damns laisser-faire individualism as heartily as it is damned by
Carlyle.

In the last few decades, physics itself appears to have

been moving away from the rigid doctrine of deter-
minism. A layman can, of course, say nothing with con-
fidence upon this matter, but it seems clear at least that
something is happening to the old idea of "inexorable"
laws of nature. The view is expressed by high authori-
ties that all scientific laws may be only "statistical
laws"; that is, laws of the average behavior of things or
entities in "crowds," which leave the behavior of in-
dividual entities partly a matter of real "chance," and
which may even leave room, in the case of the higher
organisms, for "free will." 9 The whole matter is under
lively discussion among physicists. Determinism, if not
universally abandoned, at least is under fire. Mean-
while, teleological ideas crop up with renewed strength
in some quarters. The general position seems to be that
while there undoubtedly are "laws" for science to dis-
cover and make confident use of, the implications of this
fact, and the nature of these laws, are open to a general
reconsideration.
N ow it is clearly the mid-nineteenth-century concep-
tion of purposeless but inexorable "laws of nature,"
which has caused most of the trouble in the social
sciences. The belief in, and effort to discover, scientific
"{social laws" was bound to lead to confusion, so long
as it was supposed that all scientific laws must be of this
type. It is true that there have always been those who
could persuade themselves that no violence need be
done to our experience of the nature of human thought,
emotion, volition, conduct, and social life, by the hypo-
thesis that every mental and social event is mechani-
cally caused and determined by antecedent events, the
chain of which leads back into the physical environment,
9. A. S. Eddington, The Nature of the Physical World (1928), is my
chief authority for this statement.

and the physical organisms upon which the environ-

ment acts. Some economists may be able to believe that
men in business life are automatically impelled into
given courses of action by a balance of external stimuli;
and some historians to suppose that the course of history
is mechanically determined by the action of the material
surroundings of men upon their bodies and minds. But
such notions clash with the persistent habits of thought
developed in practical life, and the usual blending of the
two sorts of notions in social theories introduces a sad
confusion. In any case, social determinists have not at-
tempted to get down to the level of close studies of the
mechanical causation of the actions of individuals, and
develop sociology from physiology, as their view should
lead them to do. They have been content as a rule with
vague and sweeping generalizations about social and
historical processes, which can hardly pass muster as
" scientific laws." Meanwhile, the bias introduced by
this whole way of thinking has caused the knowledge of
men's motives and purposes which we acquire in practi-
cal life to be neglected, because the notions of practical
life do not square with the dogma of mechanistic deter-
minism. It may be that the change now in progress in
the philosophy of the natural sciences will in time pro-
duce a "mental climate" more favorable to the unem-
barrassed progress of the social sciences.
In the history of the social sciences themselves, during
the past three centuries, the belief that there are "nat-
ural laws " of human behavior and therefore of the life
of society, has not always been as closely identified with
the doctrine of determinism as belief in such laws has
been in natural science. In the seventeenth and eigh-
teenth centuries, numerous writers who tried to develop
genetic or explanatory psychological and social sciences
were at the same time defenders of the doctrine of "free

will." Even the notion of the mind as a "mechanism,"

and of society as a "mechanism" in which the wills of
individuals are the forces that interact, did not always
carry with it an acceptance, in the psychological sphere,
of the "principle of necessity." Hobbes, who was one
of the first to construct what was virtually a system of
psychology and sociology on "mechanical" principles,'
was a rigid determinist. But not all of the later writers
who tried to use the same method, accepted the
doctrine. Descartes and his followers were strict deter-
minists in the sphere of "natural philosophy," but in-
sisted that the human will is "free." Yet they tried to
analyze the mechanics or dynamics of the intellectual
and emotional life, merely insisting that if the mental
mechanism is to work properly, the will must function
properly, that is, under the control of_"reason"; and
that its failures to do so, for which the individual is to
blame, are the sole causes of human sin and misfortune.
This, incidentally, was precisely the doctrine of Ques-
nay, who professed himself as in metaphysics a disciple
of Malebranche; yet Quesnay conceived society's eco-
nomic system as a "mechanism." 3
1. See HOffding, Hist. of Mod. Phil., Book III, chap. 4; and best of all,
G. Croom Robertson's Biography of Hobbes, chap. 4 and passim.
Robertson, the highest authority on Hobbes, is very explicit on the im-
portance of the mechanical idea, derived from the new physics of the
time, as the basis of Hobbes' work; and one need read no more than the
first part of Leviathan, to see that it was the basis.
2. See Windelband, op. cit., pp. 410-420 and passim; and H. A. P.
Torrey's The Phil. of Descartes in Extracts from his Writings (1892),
pp. 15-34 (Prof. Torrey's excellent introduction analysis), and pp. 275-
326 (Descartes' writings on Physiology and Psychology).
3. In Quesnay's time, the philosophies of Descartes and Malebranche
had largely gone out of fashion in France, and most of les philosopher
agreed with Voltaire in professing to take Locke instead of Descartes as
their master. Hence the Physiocrats, who liked to quote Malebranche,
were despised by many as religious and metaphysical dreamers. The
anxiety of E. Allix, in the article referred to above on p. 5, n. 8, to
clear them of this charge, leads him to go too far, I think, in denying the
reality of their debts to Malebranche. See Quesnay's Works (ed.

,Of the Scottish school in the eighteenth century, to

which Adam Smith belonged, it is more difficult to
speak with confidence. They were in the tradition
started by Locke; and the sensationalists, association-
ists, and ideologists of the later eighteenth century, who
also professed to build upon .Locke, were strict deter-
minists. But Dugald Stewart claimed that they all
misunderstood Locke, and that the philosophy of the
Scottish school was really the logical development of his
ideas; and Stewart, tho he believed in psychological and
social "laws," believed also in "free will." 4 The great-
est of the group, Hume, maintained that the "principle
of necessity," or causality, cannot be proved; our re-
liance upon the " laws of nature " rests only on " custom
and habit"; but there is, I think, no indication that in
practise he abandoned determinism in psychology or
elsewhere.5 Hutcheson and Adam Smith are silent on
Oncken), p. 745, where Oncken in a footnote brings together the chief
passages in which Quesnay speaks of, and draws upon, Malebranche. The
article on Libert6 (same volume, pp. 747 if.) develops a form of the Car-
tesian doctrine of free will; and I agree with Oncken's estimate of the
great importance of this in the Physiocratic system. Quesnay finds in
the power of "reason" to weigh, analyze, and modify "motives, " some-
thing that makes human conduct more than a merely mechanical pro-
cess. The ideas of a mental and of a social mechanism are plainly present
in the essay, but he insists that "reason" is free to play, or not to play,
its part well in the process of the equilibration of "motives"; and that
the course of events is beneficent for human welfare only if it does play
its part well. The doctrine of "l'ordre nature" cannot be understood
without a study of this essay.
4. D. Stewart, Works (ed. Hamilton) vol. i, A Dissertation on the
Progress of Metaphysical, Moral, and Political Philosophy, since the
Revival of Letters, pp. 258-272, 279-280, 295-307, 311-313, 431-449,
489, and passim. This work is most valuable to the student of eight-
eenth-century thought, written as it was just after the close of the cen-
tury by one who shared all of its most typical ideas, and knew almost
the whole of its literature. It was written as a supplement for the first
number of the Encyclopedia Bri1'annica, finally published in 1825.
5. The doctrine of determinism is sometimes identified with the no-
tion which Hume did demolish and reject, namely, that causation is
something other than empirical sequence or correlation; that we know
why a cause produces its effect, and can prove that it must always do so.

the matter; but in their theories of the psychological

genesis of "moral sentiments," they always speak as
tho men were free to act or not to act in accordance with
the "moral sentiments" which their experience gener-
ates through the working of their mental "mechanisms."
These examples will perhaps suffice to indicate the fre-
quency with which belief in psychological and social
"laws of nature," or in "mechanically" explainable
psychological and social processes, was divorced in the
eighteenth century from any full acceptance of the doc-
trine of determinism.6
It was in the early nineteenth century that deter-
minism, as applied to psychology and sociology, became
the really prevalent and fully realized concomitant of
the application in this sphere of the idea of "natural
laws." Professor Rogers, in his history of English
philosophy in the nineteenth century, brings out the
way in which this doctrine seized upon the imaginations
of many in the early decades of the century, and became
with some a kind of gospel.' The Benthamites, who
But a "faith" that exact laws of sequence will always hold true, where
the same conditions are present, is, I think, determinism; if one is not
prepared, in practise, to admit exceptions, his lack of logical ground for
his faith makes no difference. Hume's explanation of this "faith" was
psychological; and I can see little difference between this and the Kant-
ian doctrine that determinism is a "necessity of thought," arising, so to
speak, from the way our minds are made, instead of from the way in
which the universe is made. The very explanation that Hume gives of
our belief in the reliability of the laws of physics, involves psychological
determinism in the form of a belief in laws of the "association of ideas."
6. Even the eighteenth-century writers who were professed deter-
minists, often distinguished between physical and psychological causa-
tion in a way intended to save what the "free will" advocates were
fighting for. See some of the passages in Stewarts' Dissertation, cited
above, especially pp. 272, 305-307. Perhaps the essential difference be-
tween most eighteenth- and most nineteenth-century conceptions of
psychological and social "laws" lies in the fact that the eighteenth cen-
tury was building on "introspective" psychology, and was therefore
trying to apply the new "mechanical" conceptions without being untrue
to the realities of what the Germans call man's "inner experience."
7. Rogers, English and American Philosophy Since 1800, pp. 128 ff.

utilized in their philosophy the association psychology

of Hartley and James Mill, were determinists; and this
group, of course, included the Mills and some of the
other economists. At the same time, the Romanticists
of the period, building what systematic philosophy they
had largely upon what they knew of the teachings of
Kant, Fichte, and Schelling, upheld "free will"; and
denounced the deterministic and mechanistic philosophy
as the work of the hated eighteenth century.8 In France,
after the death of "ideology," some romantic philo-
sophies, and the idealistic philosophy of Cousin, who
drew heavily upon the Scottish school, championed
"free will"; but there were Comte and many others to
uphold the opposite doctrine, or at least to talk of social
and historical laws in terms which clearly implied it.9
Psychological and sociological determinism gained
ground rather than lost it, as the century advanced.
Yet the protest also gained ground, and gained sobriety
and philosophical penetration, as trained philosophers
began to attack the whole idea of "inexorable" laws of
nature. Toward the end of the century, a large part of
the educated public lost much of its earlier naive faith
in the theories and "laws" of the psychological and
social scientists. What we now need, I believe, is an ap-
proach to social science more like that of the eighteenth-
century writers, who, despite the fact that natural
science in their time was rigidly deterministic, as it is
perhaps ceasing to be in our time, were able to conceive
of social 'laws" in a way that did not commit them to
the treatment of men as mere automata.
8. I am, of course, referring here to the English Romanticists -
Coleridge, Carlyle, Wordsworth, Ruskin, et al.
9. L. LUvy-Bruhl, Modern Philosophy in France, chaps. 11, 12.

III
The evolution of the idea of "laws " in economics has
closely paralleled its evolution in the natural sciences;
except that, as in other social sciences, it did not until
the nineteenth century come to carry so strongly the
rigidly deterministic connotation.
The central notion of economic theory of the "ortho-
dox" type has always been the conception of a society's
economic system as in some sense a mechanism. Labor,
capital, business ability, goods, and the money of con-
sumers, have been pictured as "gravitating" to their
best markets, with resultant interactions of supplies,
demands, prices, and incomes taking place according to
definite "laws." The recent development of mathemat-
ical formulations of the general theory has made clearer
than ever its formal resemblance to the theory of me-
chanics. But of course the analogy with mechanics,
and the conception of the economic system as a mechan-
ism, do not need to be taken too seriously. I shall
argue below that they can be used without at all imply-
ing acceptance of a mechanistic metaphysics, or of a
deterministic theory of human behavior. But their use
in the past has undoubtedly often tended to foster a
kind of economic fatalism, which some critics have mis-
takenly supposed to be a necessary consequence of the
orthodox type of theory.
In the eighteenth century, and by many writers in the
nineteenth, the economic mechanism was regarded as a
wise device of the Creator for causing individuals, while
pursuing only their own interests, to promote the pros-
perity of society; and for causing the right adjustment
to one another of supplies, demands, prices, and- in-
comes, to take place automatically, in consequence of
the free action of all individuals. This doctrine of "eco-

nomic harmonies" was entirely in accord with the cor-

responding notions of contemporary natural, as well as
moral, scientists. The notion that the mechanical laws
which "control" nature's operations, and enable us to
explain and predict them, are calculated to insure the
harmonious mutual adjustment and proper functioning
of things, did some harm in scientific thought, but did
not prevent men who held it from making scientific dis-
coveries. Mach's remarks about the eighteenth-century
physicists were referred to above. Back in the seven-
teenth century, Robert Boyle, in a remarkably cautious
and critical essay on the philosophy of "final causes,"
said that Harvey, the physiologist, had told him that he
arrived at his discovery of the circulation of the blood
by thinking that the valves of the heart must have a
"purpose," and then looking for it.' And there is little
doubt that the minute study of the functions of organs
in living organisms, which was prompted by the desire
of Paley and his predecessors to bolster up the " design "
argument for a Deity, did much to promote the progress
of biology. So the doctrine of economic harmonies,
while definitely misleading in some of its implications
and childish in its extreme forms, was not necessarily a
hindrance in the early stages of the search for regulari-
ties or laws, and natural processes of adjustment, in
society's economic life.
Ricardo and his immediate followers did not particu-
larly emphasize the notion of economic harmonies. In
1. Boyle's Works, iv, 517 ff. This truly remarkable essay was written
at the request of the Secretary of the Royal Society, whose members
(including Boyle, Newton, and others) had discussed the problem of
whether natural scientists should take any stock in the idea that Nature
works to certain discoverable, divinely appointed, ends; and wanted
Boyle to write out his views (see preface of essay). Boyle supports
the idea cautiously, as Newton did also (see last few pages of the Prin-
cipia). Boyle founded a lectureship in "natural theology" which func-
tioned through most of the eighteenth century.

fact the pessimistic tendency of their reasonings about

population growth, diminishing returns, and wages and
profits have caused them to be contrasted with the
optimists, not without justice. It is true that they still
supposed that self-interest, or the search for profits,
would generally lead individuals to turn their efforts
and investments into the channels in which they would
do most to increase national wealth; and also that the
"natural" prices, wage-rates, and rates of profit, result-
ing in the long run from the free play of demand and
supply, would all reflect and promote a better use of the
nation's resources in meeting its wants than would be
likely to be produced by legislative " interference " with
the flow of things to their best markets. But their pic-
ture of the natural working of the economic machine,
and of its outcome, was hardly rosy enough to lead
them to think that it suggested the presence behind the
scenes of a benevolent, divine. guiding hand. In fact the
Romantic poet and essayist, Robert Southey, attacked
Malthus precisely because he had denied this hypo-
thesis and had propounded a theory savoring of the late
eighteenth-century French doctrines of "brute mech-
anism, blind necessity, and blank atheism." 2 The
classical economists, in fact, shifted the emphasis from
the beneficence to the inexorability of economic laws.
The tone of their teaching was deterministic. The eco-
nomic machine was in effect represented as grinding out
definite amounts of wages, profits, and rent for the three
social classes, almost with the precision and inevitabil-
ity of a literal physical machine.
Modern theorists, however orthodox in their general
tendency, are aware that economic laws do not have
this precision and inexorability. We are ready, I think,
for the view that the general laws at which theory ar-
2. R. Southey, Essays Moral and Political (1832), pp. 77 ff.

rives, tho it arrives at them in the first instance without

the help of statistical studies, are of the nature of "sta-
tistical laws"; that is, they are laws of the average
behavior of men in the mass, in response to economic
conditions which their behavior in turn modifies. Or, if
this view is preferred, they are laws of the average
"behavior" of prices and the like, under the influence of
such human behaviors Experience of human motives,
of the kind that is gained in practical life,-enables us to
make rough predictions of the ways in which, on the
average, men will react to the changing physical and
market conditions which affect their business plans.
Since each man's actions affect the data of the calcula-
tions of numerous other men, there are causal sequences
that link business developments in one region or in-
dustry, with those that follow it elsewhere; and the
theory of these processes can be worked out, with some
help from the calculus, on lines somewhat remotely
like those of the theory of mechanics. But, of course, the
extremely general laws of pure theory do not specify
any actual quantities, nor the actual forms of the func-
tions supposed. The formulation of laws that can be
used to make definite predictions requires the coopera-
tion of the theorist and the statistician, and we are just
beginning to explore the possibilities and surmount some
of the difficulties of this undertaking. It is not possible
3. Of course in saying that the laws of theory are of the nature of
statistical laws, I am not denying the important and familiar difference
between the "curves" of theory and actual statistical correlation curves.
Theory "isolates" its variables as the statistican cannot. But I am
arguing that even if the coeteris paribus assumption were to hold good in
a particular case in "real life," the conformity of the outcome of the
forces at work in that situation to any definite "law" that had been de-
rived from a study of similar cases or situations (in which the assump-
tions also had been realized) would be only approximate; and would be
due, not to identical similarities in all human behavior occurring at dif-
ferent times or in different places but under identical (external) condi-
tions, but only to broad similarities in reactions of masses of men to
identical economic "stimuli."

to suppose that even with the help of the best statistical

technique, we shall ever be able to make any very exact,
or any very long range, economic predictions. All this is
familiar. The point to be emphasized here is that it in-
volves, not an abandonment of the method of "ortho-
dox" theory, but a very definite abandonment of the
notion of "inexorable " economic laws; since that notion
implies that the choices of individuals are so strictly
determined by external events (e. g., price-changes) as
to be exactly predictable.
Some economists might maintain that the laws of
theory are "of the nature of statistical laws," without
admitting the reason which I have assigned, - that the
behavior of particular individuals is not strictly " deter-
mined" by their economic situations; that they have
not only "non-economic motives" which modify their
reactions, but also something like "free wills." The
economist who, as a philosopher, feels that the doctrine
of determinism is a "necessity of thought," may say
that our laws are only laws of average tendencies,
merely because our knowledge of the characters of in-
dividuals, and of their economic situations, is imperfect;
but that "in reality," all actions of men in the economic
world, and therefore all economic events, are strictly
determined by the action of economic situations upon
human minds. Personally, I cannot accept such a state-
ment about a "reality" admittedly unknown to us; nor
distinguish this doctrine from a hopeless economic fatal-
ism. But at all events, this question does not affect the
character of the actual "laws" of economic theory.
These are only laws of average tendencies, resulting
from the average behavior of men in the mass; and are
therefore not "inexorable laws."
There are some other connotations of the notion of
economic laws as inexorable laws of nature, which have

little or nothing to do with the matter of psychological

determinism. Business men sometimes speak of these
laws as if they were impersonal but active and irresist-
ible forces, which control all prices, rates of wages and
the like, in the economic system, quite independently of
all human wills, desires, and ideals. They may say, for
instance, that they cannot, if they wish to, pay their
employees higher wages, because the market rate of
wages, which they have to accept, is controlled by eco-
nomic laws. Modern economists should perhaps be
doing more than they are doing to dispel this notion,
which has no doubt been encouraged by the too exclu-
sive preoccupation of theorists in the past with the world
of "pure competition." If the actual economic world
were the world of pure competition, there would be
some excuse for the attitude of the business men re-
ferred to.4 In that world, no employer could have a
wage-policy, or a price-policy. He could not, out of
benevolence or a sense of justice, pay higher wages than
his competitors were paying; nor, out of a more than
average hardness and greed, pay lower wages. But in
the actual economic world, every business man, and
every trade union or similar group, is in a situation
which gives him or it what may be called, by a useful
refinement of theory, some degree of monopoly power.
Economic friction, to use the older term, leaves every-
one free within limits to have a "policy'" in regard to his
price; and to try to exact for himself, in his dealings
with others, a little more than the gains that would
accrue to him under "pure competition"; or, on the
contrary, to treat others a little more generously than
he would or could in that regime. This, of course, is a
4. Not, of course, for the notion of laws as external constraining
agencies, but for the idea that the individual employer in a labor market
cannot in the least degree deviate from, nor influence, the market rate of
wages.

familiar qualification of the idea of rigid economic laws,

to which even the classical economists were not entirely
blind; but they did not attach enough importance to it.
A still more serious and more absurd error than the
one just mentioned, which economists of the past have
unwittingly encouraged in -the minds of laymen and
opponents, is the notion that economic laws are sup-
posed to describe an inevitable course of events which
neither the state nor any other human agency can pre-
vent or alter. Of course the laws are only supposed to
describe what will happen, under given conditions, the
absence of "interference" by the state being assumed
as one of the conditions. But the impression that ortho-
dox theory has always tended to discourage such "inter-
ference " as likely to be futile, or powerless to change the
course of events, is not altogether baseless. It has al-
ways tended to lead its votaries to a belief that there are
rather narrow limits upon the power of society to alter
the direction and outcome of the "natural" economic
tendencies at work within it. The foundations of this
belief can only be touched upon here; but I shall have
more to say about them in a future article.
In the seventeenth century, Dudley North antici-
pated what was nearly the outlook of the classical
economists of the nineteenth century, in asserting that
" no laws can set prices in trade, the rates of which must
and will make themselves." I Of course he was thinking
of efforts simply to decree that certain prices should be
charged and paid by individuals, the decree being un-
accompanied by any public action calculated to redress
5. D. North, Discourse on Trade, 1690, Hollander reprint (J. Hop.
kins Univ. Press, 1905). The preface of this tract has been neglected by
historians of economic thought. It suggests that the new "mechanical"
philosophy (ascribed to Descartes), which North says has begun to
renovate "natural philosophy," must be applied to the theory of
"Trade"; and is full of other significant hints.

ti.e balance of supply and demand. Such efforts, as

plenty of experience in diverse times and places has
proved, are indeed futile, in societies in which "mo-
bility" and "competition" are at all highly developed.
But all economists, of course, know that it is always
possible to fix prices, if the government is. willing and
able to enter the market as buyer and seller on any scale
that may be needed to make the fixed price the " equili-
brium price." This is, we may say, one way of manipu-
lating the economic mechanism. And there has never
been anything in orthodox theory inconsistent with the
idea that this mechanism can be manipulated. It is not,
like Newton's celestial mechanism, beyond human con-
trol, but, li1~e"natural" mechanisms on the earth, can
be controlled by a human skill which will increase pre-
cisely as we increase our knowledge of economic laws.
The classical economists, far from denying the possi-
bility of this kind of control of economic events and con-
ditions by public action, opposed various measures of
control that were being used in their day, such as pro-
tective tariffs; 6 not on the ground that they were futile
or ineffective, but on the ground that their effects were
socially bad. As I shall try later to show, their own pro-
gram of public policy was one designed to provide just
the few measures of control which seemed to them to be
both feasible and in the public interest. Their belief
that the government could do only a few things to in-
crease economic welfare, and that much of its more or
less well-intentioned and quite effective activity was
mischievous, had two main causes.
6. Taxes, of course, are a much simpler instrument for manipulating
the system of prices, currents of trade, and the like, than government
buying-and-selling agencies. They are one way of controlling what men
will do, by controlling what is profitable. The difficulty of resisting eco-
nomic tendencies is merely the difficulty of preventing masses of men
from doing what you leave it to their advantage to do.

In the first place, they retained, as I have said, a

limited form of the belief in economic harmonies. In-
dividuals, if free to seek their best markets, would gen-
erally do just the things that were best for the nation,
because the "operation" of economic laws would insure
a coincidence of their own interests with the national
interest. Hence governmental activity of the kind that
sought to cut off any group of buyers or sellers from
their best markets, and force them to resort to inferior
markets, injured the nation, as well as this group, and
all for the benefit of the favored group that got their
business. In other words, this kind of "interference"
with "natural" tendencies was opposed on the ground
that the latter are, not irresistible or unalterable, but
better for the nation than the new tendencies "arti-
ficially" created by the interference.
In the second place, such methods as were then avail-
able or even conceivable for changing or modifying the
action of other "natural" economic tendencies that
were freely admitted to be less beneficial to the nation,
were in many cases regarded by the economists, for one
reason or another, as unpromising, unsafe, or undesir-
able. The "natural" tendency of population growth to
force wages to the level of subsistence was not a benefi-
cent tendency. But Malthus saw no good remedy ex-
cept that of urging laborers to practise moral restraint,
and advocated this, tho it did not promise to accomplish
much. Some of his followers, more boldly, advocated
the more promising remedy of birth control. Of course
state action was hardly involved here. But in opposing
the existing Poor Law, the reformers were, of course,
arguing that this bit of state 'action was accelerating,
instead of checking, the harmful natural tendency.
Again, to glance at a very different field, the monetary
theories and policies of the classical economists empha-

sized the desirability of adhering to the "automatic"

gold standard, which leaves the regulation of the value
of money to the working of "natural" tendencies. This
was not because they thought that the regulation thus
secured was perfect, from the point of view of the gen-
eral interest of the nation; still less was it because they
imagined that effective state interference with the value
of money was impossible. Their argument, which is
still respected by many economists, was simply that
"artificial" control in this case was pretty certain in
practice to work even less well than the automatic sys-
tem.
These familiar illustrations, taken together, may
suffice to drive home the point that the classical econ-
omists never held that "economic laws" describe a
"natural course of things " in the economic world which
human efforts cannot alter. They believed in natural
tendencies, processes of adjustment or equilibration,
which are in some cases socially beneficent, and in some
cases not; which can be engineered, manipulated, or con-
trolled, given sufficient knowledge and the right meth-
ods; but which cannot be abolished or thwarted by
simple decree, cannot be ignored in devising sound
legislation, and should not be tampered or interfered
with in cases where we are not in a position to control
them properly and in a way that is really in the com-
mon interest.
The further development of the orthodox type of
theory, in the last two generations, has brought with it
an ever-increasing interest, on the part of economists, in
schemes for "manipulating" the "economic mechan-
ism" in socially desirable ways. Control of currency
and credit systems is the most conspicuous case. But
most of the new forms of governmental activity for the
betterment of economic conditions, which many econ-

omists have supported from their inception -forms

of labor legislation, social insurance, regulation of pub-
lic utilities, -may be said in a sense to fall within this
category, as they all involve attempts to alter the direc-
tion and effects of natural tendencies, not by passing
laws against them, but by creating new conditions under
which the play of supply and demand will have new
effects. As economic knowledge advances, and society's
facilities for effective control of its economic system in-
crease, the limits upon its power to redirect economic
tendencies are pushed back.
There remains still, however, a difficulty with the con-
ception of an economic "mechanism" which can be
"manipulated." The human beings who have to do the
manipulating are, so to speak, themselves parts of the
mechanism.7 The conception seems to involve a dualism
which leaves the "economic man" a cog in the mechan-
ism, but regards the same man in his capacity as a " poli-
tical man," a citizen, reformer, legislator, or public
administrator, as "free" to act in the light of his know-
ledge of what is needed to promote the general welfare,
instead of having his action even approximately or
partially " determined" by the economic or the political
and social situation in which he is placed, and by the
way in which it affects his economic or his political in-
terests, or his mores and prejudices.
Now just this dualism was, in a way, the most marked
feature of the outlook of the eighteenth-century re-
formers, the French philosopher, the Physiocrats among
them, and the English utilitarians and classical econ-
omists who carried on this eighteenth-century tradi-
tion in the early nineteenth century. They all had the
7. This point is developed in a somewhat different way in an article
by the late A. A. Young: " Economics as a Field of Research," Q. J. E.,
Nov. 1927.

mechanistic idea, and worked out explanatory theories

of the forces that determine the actions of individuals
and the processes of social life. At the same time, in
their programs for political, economic, and social re-
form, they were naive "rationalists"; that is, they as-
sumed that a society of enlightened men would be able
to use government as a scientific tool for carrying out
purely rational measures in the common interest. Man
the citizen would use a "reason" ungoverned and un-
distorted in its working, or in the ends in whose service
it would work, by the pressure of his particular environ-
ment upon his particular interests and desires. But
man as the being whose conduct the rational measures
of the state were to control, would remain something
like an automaton, reacting in predictable ways to his
environment and to the forces brought to bear upon him
by the new social order.
It is true that they all tried to get around the diffi-
culty by applying in political theory, as well as in eco-
nomic theory, the conception of a harmony of interests.
The Physiocrats contended that the king's real interest
was necessarily identical with that of his subjects taken
as a body: "poor peasants, poor kingdom; poor king-
dom, poor king." Other reformers, notably the English
utilitarians, did not find this harmony working out
under existing governments; but proposed to create
it by setting up a complete system of democratic con-
trol. In both cases, however, the argument presupposed
the possibility of the achievement, by rulers and by
ruled, of a level of intelligence or rationality at which
conduct would be determined, not by the immediate
and particular environments and interests of the actors,
but by those "real" interests which were held to be
identical with the general interest of society. It was the
"enlightenment" that was counted upon to make the

political mechanism work as harmoniously as the eco-

nomic mechanism which it was to control (or whose
freedom to operate "naturally" it was to maintain).
But the mechanistic theory of human behavior, if
rigidly adhered to, is not really compatible with this
belief in the power of men to make their conduct
completely rational. The eighteenth-century reformers
never really explained or accounted for those irrational
prejudices, and narrow and anti-social interests and
passions, which they expected to see eliminated in the
new "natural" or rational order of things. Men's
mental mechanisms were and through the centuries
had been reacting to their particular environments in
such a way as to produce conduct that was largely irra-
tional; and the hope of changing this really required a
belief that man is more than a mechanism; that he can
assert his reason and his will and change the nature of
his motives. The Physiocrats, with their belief in a
measure of "free will" and in the power of reason to
judge motives and ends from an ideal standpoint, were
consistent. But the strict determinists, including the
English utilitarians and perhaps the classical economists,
were I think unconsciously caught in a circle.
The same dilemma, I think, must be faced by the
modern behaviorists in psychology. And it must be
faced by economists who conceive the economic system
as a mechanism to be manipulated. One can fancy that
a man trained in economic theory might transfer his
energies to the field of political theory, and attempt to
formulate the laws of the natural working of the demo-
cratic political mechanism, on certain assumptions
taken from experience as to the motives and purposes of
average voters and average politicians. The result
might be interesting. But would it increase our faith in
the practical possibility and desirability of governmen-

tal manipulation of the economic system? Of course

there is only one way out of the difficulty. This is to
admit that the mechanistic approach to social theory,
while useful within limits, does not reveal the whole
nature of social reality. The motives of individuals,
which are the ultimate "forces" dealt with in this type
of theory, are themselves changeable, and do change, as
civilization develops; nor can we afford to admit that
this historic evolution is itself rigidly determined and
fated to proceed in a given direction. Man has a measure
of "freedom" to bring the character of his motives un-
der the control of his "reason." To deny this, I think,
is to be a fatalist. The classical economists and their
utilitarian allies in reality escaped complete fatalism
only because they inconsistently assumed that a demo-
cratic legislature could work consistently for the
"greatest good of the greatest number," and do all
necessary manipulating of the circumstances that deter-
mine the paths of conduct of private men, without hav-
ing its own motives manipulated by irrational political
forces. When Carlyle accused them of being fatalists,
he was mistaken; but he was not so far wrong when he
criticized them for supposing that all society's problems
could be solved by tinkering with mechanisms, and in-
sisted that a change in the spirit and ideals of the nation
might be far more important.8
To return to my original proposition in this whole
part of the discussion, we have to conclude, I think,
that in more ways than one the "laws" of economic
theory are far from being "inexorable." The classical
economists strongly tended to regard them as inexorable,
but only in the sense that under given conditions, which
8. For the charge of fatalism, see Past and Present, Books I and III
passim; and for the other charge, Signs of the Times, in Illustrated
Library ed. of Carlyle's Works, i, 465 if.

society certainly could alter in some cases, certain ad-

justments in the economic system would inevitably work.
themselves out, and prices, wages, and profits, in all in-
dustries, would seek certain levels. The more modern
view is that the laws describing these processes of ad-
justment are only rough descriptions of tendencies, or
are of the nature of "statistical laws"; and in no sense
rigid "laws of nature" in the nineteenth-century mean-
ing of that' phrase.
But while the notion that economic laws are inexor-
able has been decaying in recent decades, the notion
that they are in some measure beneficent, or that they
guarantee a certain measure of "harmony" in the work-
ing of the whole economic system, has hardly shown the
same signs of disappearing completely. Accepted by the
classical economists only in a limited form, it enjoyed,
in the second half of the nineteenth century, a certain
renaissance and further development. Bastiat and his
followers, a little earlier in the century, carried it out to
absurd lengths. The marginal utility and marginal pro-
ductivity schools, when they came along, developed a
terminology which almost inevitably suggests it, and
some of them went far in accepting it outright. More
"optimistic" views about population growth, the con-
tinual "postponement" of the stage of "diminishing
returns," the "natural" factors making for "increasing
returns'" in many or even in all industries with the
growth of population and of capital, and the action of
the forces that determine wages, came to prevail. To
look at a different aspect of the matter, opposition to
socialism was- undoubtedly a factor in causing various
economists to argue that in our present economic sys-
tem, the play of "natural" forces brings about a-large
or maximum social product, and a fairly equitable divi-
sion or distribution of it among individuals and among

social classes. The great majority of the theorists now

writing are more cautious; but the doctrine of "eco-
nomic harmonies," understood not as meaning that we
live in the best of all possible economic worlds, but as
meaning merely that the "natural" or spontaneous
tendencies which work themselves out in a more or less
freely "competitive " society are very often socially de-
sirable tendencies - this doctrine, or opinion, cannot
yet be said to be entirely dead.
It is useful to compare the persistence of this idea in
economics, with the persistence of the corresponding
idea in natural science. In its origins, the idea in both
cases was undoubtedly connected with the eighteenth
century's theological and teleological philosophy of
natural laws. But it does not follow from this that it was
bound to be, or should have been, discarded completely,
as soon as science became completely separated from
theology. For even when we reject the notion that
Providence ordained the laws of nature, we do not there-
fore necessarily reject the belief, whicl must of course be
tested by facts, that the processes described by scientific
laws are processes of adjustment of things to changing
conditions, which tend to preserve a certain measure of
" order" and "harmony"; or to insure, under all condi-
tions, the effective functioning of individual entities in
the systems of which they are parts. Nor has this idea
ever disappeared from scientific thought. Even the
theory of evolution by natural selection, which has done
more than anything else to undermine the design argu-
ment for a Deity, is an alternative explanation, and not
a denial, of the " adaptations'" on which that argument
was based. In other words, it still encourages the view
that nature's processes, as seen in the biological world,
are processes of adjustment of things to their environ-
ments, or of the attainment of an increasing measure of

"harmony." There is certainly an analogy between this

and the idea that in the economic life of human societies,
the "natural" working of competition brings about an
adjustment or adaptation of the whole economic system
to the physiographic environment, and of every individ-
ual to the economic system of which he is a part.
The eighteenth century's optimistic philosophy of the
harmonious order and wise laws of nature was perhaps
not so much a deduction from a priori theological postu-
lates, as an inference from facts which were in the main
correctly analyzed. But the inference was overstated
and turned into an argument for the "design" hypo-
thesis.9 Of course this tended to happen because the
hypothesis was there from the outset, and facts were
selected and interpreted, and theories stated, in such a
way as to confirm it. But the effect of this was not
wholly bad. The faith that the "plan" of nature's
operations would turn out everywhere to be rational and
wise, probably guided modern science in its beginnings
to its most valuable discoveries. It stimulated the
search for "order," for uniformities in nature's proce-
dure under similar conditions and for differences of pro-
cedure adapted to different conditions, for the simplest
and the smallest number of principles to explain complex
and apparently diverse phenomena, and for indirect
causal connections that would give every event, how-
ever isolated and inexplicable it might seem at first
sight, its appropriate place in the general "scheme."
But the same faith also led to some unwarranted con-
clusions. Too much meaning was read into the order
and harmony which science seemed to be discovering in
9. Adam Smith, for one, distinctly held that whatever is valid in
theology is an inferencefrom, and not a postulate from which to deduce,
the harmonious Order of Nature, which is independently revealed by
science. See his (much neglected) "philosophical essays," especially
the essay on the history of physics.

nature's plan. Being taken as proofs of the wisdom of

God, they had to be regarded as completely worthy of
that wisdom. The coming of Darwinism, while it did
not do away with the idea that nature works toward
adjustment and harmony, called attention to the fact
that she works toward them, so to speak, by methods
which are from the human point of view most often
wasteful and cruel; or which involve the perpetual re-
currence of a certain amount of maladjustment and dis-
harmony-' In a word, what has happened since the
eighteenth century, in natural science as in economics,
has been a serious modification, but hardly a complete
abandonment, of the belief in an harmonious Order of
Nature.
That a trace of that belief remains implicit, legiti-
mately as I think, in modern orthodox economic theory,
it seems impossible to deny.2 It is true that modern
theorists are aware that there is no marvellous perfection
in the working of our economic system; that its quasi-
automatic adjustments do not insure anything like the
absolutely wisest utilization of society's resources in
meeting its wants, or the largest possible output of use-
ful goods and services; and that distribution of the out-
put among the agents of production in accordance with
the "marginal productivity" of each agent, is not neces-
sarily synonymous with distributive justice. The ad-
1. See the comment above, p. 9, note 8, on Huxley's views.
2. Many modern theorists say that evaluative judgments upon the
working of the economic system, and upon public policies, are no part
of the business of the economist, qua economist or scientist; and repu-
diate justificatory inferences from theory on this ground. But this
seems to me less important than the fact that their scientific theory
does lead, naturally if not logically, to a certain measure of "optimism,"
if one accepts it as valid and then applies his common sense to the
evaluative problem. I am convinced that the way to divorce economic
theory from dogmatic and doctrinaire philosophies of public policy, is
not to try to dodge the evaluative problem, but to try hard to solve it
as honestly and carefully as we can.

justments that do work themselves out, in a rather hap-

hazard and wasteful way, are at all times imperfect. It
is certainly conceivable that a sufficiently intelligent,
well-informed, efficient, and wisely zealous central plan-
ning authority, of the type desired by socialists, might
eliminate much waste and maladjustment. But many
theorists still believe that socialists, and most laymen
as well, underrate both the effectiveness of the forces
that make for tolerably good adjustments in our present
system, and the difficulty of securing even equally good
adjustments in a planned economy; and that at all
events, so long as we retain our present system, sporadic
interferences with the flow of things to their best mar-
kets, and with the resulting levels of prices, are very
often in danger of doing more harm than good. This,
much qualified, version of the belief in economic har-
monies is not, I think, at all out of keeping with the tone
of the most "up-to-date " and " scientific ' thinking, in
the natural sciences.
IV
A brief recognition of some possible doubts about this
last conclusion, and of the further problems which they
raise, will provide the best transition to the second in-
stallment of this discussion, which I hope to publish in
the near future.
I have argued that modern science still supports the
view that in the inorganic and organic worlds nature
works in the direction of a certain measure of what is in
a certain sense harmony: equilibrium of forces, adjust-
ment of things to their environments, development of
organs to perform necessary functions. This is truly
analogous to the view that the natural working of com-
petition tends in the economic world to produce a gen-
eral "equilibrium," adjustment of supplies to demands,
of prices to costs, and so on. But there is the difficulty

of what is meant by calling the economic process, which

is supposed to bring about these adjustments, a "na-
tural" process, and regarding it as the process in eco-
nomic life which corresponds to other "natural" proc-
esses, outside of human societies. This difficulty arises
from the fact that in our society, a particular fabric of
"institutions," mores and customs, and business meth-
ods, in large degree peculiar to our own civilization,
constantly changing, and changeable by deliberate, col-
lective effort, condition the working out of the process
in its every phase. No doubt if the word "nature" is
used in its widest and perhaps its proper sense, mankind
and its societies are parts of nature, and everything that
goes on in society, including the growth of institutions,
is part of a system of natural processes. But this is not
the sense in which the adjective is used when and if the
quasi-automatic working of the competitive economic
system is called natural. A contrast is implied between
the "natural " or spontaneous tendencies which are
there at work and are described by economic "laws,"
and the " artificial " or deliberate regulation of economic
life by the state or by some other authority. But in fact
the working of the economic system is in all times and
places, and even in the theorists' imaginary world of
pure or perfect competition, regulated in manifold ways
by legal institutions and social conventions, which are
perhaps as artificial as the interfering methods of con-
trol deplored by old-fashioned liberals. Why draw the
line at this particular point between the "natural"
tendencies in the economic life of society, and other
tendencies, represented in the activities of labor unions,
of governments, of socialist agitators, and the like,
which perhaps are also a part of the general system of
tendencies toward better adjustment to environment on
the part of society and of its members?

The same objection may be stated in another way.

The adjustments which work themselves out in the in-
organic and organic worlds cannot properly be judged
or evaluated by human standards and called "good."
To say that nature works in the direction of an equili-
brium of forces, and of adaptation of things to their
environments, is not to say that she works toward re-
sults that accord with human ideals. Biological " adap-
tation" insures only "survival"; and while some
thinkers have tried to get an ethic out of Darwinism,
and connect all valid human ideals with the struggle of
human beings and of groups and races to survive by
achieving biological or economic adaptation to environ-
ment, this ethic does not seem to many, nor I confess
to me, at all adequate.vWhatever of good, or social
welfare, is achieved by human communities is achieved
not by any purely automatic and in that sense natural
process, but by deliberate efforts guided by human
ideals. If the whole of social life is called a natural proc-
cess, then nature in this case is working toward humanly
valuable ends; but only because we have enlarged nature
to include man and his ideals and his conscious efforts to
attain them. Now the natural economic process of
orthodox economic theory is -of course not wholly an
automatic or blind process. It is the result of the inter-
play of the conscious efforts of all individuals to achieve
their more or less private and self-centered ambitions,
by achieving economic "adaptation." Society, more-
over, has evolved a division of labor which makes men
interdependent, a system of institutional restraints to
limit what we stigmatize as robbery and exploitation,
and a regime of "competition" of a particular kind of
which one aspect is "competition in service." As a re-
sult there is a partial coincidence of individual and social
interests, and the indirect and unforeseen results of pri-

vate actions directed only to a private and therefore

partial good are often contributory to a larger social
good. But precisely in so far as it is blind or automatic,
and in that sense natural; in so far, in other words, as it
is not guided by human foresight employed in the ser-
vice of completely ethical ideals, in just so far does the
economic process described by economic laws fall short
of being the kind of social process that can result in the
complete "harmony" that would really "maximize wel-
fare." What is good in the process and its outcome is the
result of what is good in the purposes of individuals, and
in the moresand the institutions by which their purposes
are partly socialized, or by which, at least, their actual
conduct is partly socialized, the element of social pur-
pose being embodied in these very institutions and
mores. There can be no warrant, then, for the belief that
a more complete socialization of economic life and ac-
tivity, a more complete control of it by human intelli-
gence engaged directly in the service of social welfare,
would not increase the amount of economic harmony
achieved. The securing of this harmony cannot be left
to an automatic natural process. The process to which it
is entrusted at present is defective just in so far as it is in
this sense natural; and to make it a less automatic and
more socially purposeful process ought to be our aim.3
Of course the social purpose behind institutions and
mores is not at present a fully conscious purpose. They
have been built up by compromises among more limited
purposes, by a kind of automatic "natural selection"
3. It should hardly be necessary for me to say that by "socializing"
economic activity, and making it "socially purposeful," I do not mean,
necessarily, what socialists and other critics of " the profit-motive " mean
by such terms. The desire, and the freedom, of individuals to choose
and carry on the lines of activity in which they can make, legitimately,
the largest gains for themselves, by supplying services that others want,
is not incompatible with a will on the part of all to make the general
good, and not any private good that conflicts with it, the supreme end.

of elements in the institutional fabric which further

''group survival," and by periodic reform movements
that have tried to bring a fully conscious social purpose
to bear upon them. The automatic or "natural" part
of the process of the growth of institutions may do better
work in the long run than deliberate effort guided by
insufficient knowledge and foresight can do; but it
can never do as good work as a conscious social purpose
can do, when fully armed by social science. It can fit
societies to prosper materially and morally, to the ex-
tent needed for "survival"; but not to the extent
needed for full achievement of the "good life."
These objections to the notion that the automatic
operation of "natural" economic laws can be trusted to
take care of all needed adjustments in a community's
economic system, and to make it work for the general
welfare, have been for a century the chief burden of the
arguments of most rebels against orthodox economics.
As against that notion, stated in just that form, I think
they are undoubtedly valid. The processes described
by economic laws are real processes, and they are proc-
cesses of adjustment, comparable in a sense to other
natural processes. They make in a measure and in
many cases for economic harmony and social welfare,
but only because and in so far as the human purpose to
promote these ends is, in a sense, active in them, in
the wills of the individuals who carry on economic
life, and in the institutions and mores that help to control
their activities. To make this human purpose as strong
and effective as possible, and to modify our institutions
to this end in so far as that may be necessary, must be
our aim. If I believed that this conclusion was really
contrary to the spirit and purport of the traditional
type of economics, I should be among the "rebels."

But I believe there is another, neglected, aspect of the

philosophies of the eighteenth-century pioneers who
gave this type of economics its direction. The present
article has considered only those aspects of the notion of
natural economic laws, as accepted in the past, which
have strict parallels in the history of the idea of such
laws in natural science. But the reader will recall that
the Physiocrats, and Adam Smith, believed not only
that there are causal " laws of nature " which control the
course of events in the universe at large and in society,
but also that there is a moral "IjaNw of Nature," con-
sisting of the rules which, as Adam Smith said, "ought
to run through and be the foundation of the [civil] laws
of all nations." 4 This notion pervaded their philoso-
phies of what the institutions of a rationally ordered
society ought to be. It was, in the case especially of the
Physiocrats, confusingly blended with their notion of
causal or explanatory economic laws, by a twist charac-
teristic of eighteenth-century thought, but not readily
intelligible or comprehensible to modern minds. A
clearer interpretation than has ever been given of this
whole side of their teachings would, I believe, throw
new light upon their conceptions of economic laws, their
ideals as to laissez-faire or natural liberty, and the foun-
dations of such faith as they had in economic har-
monies; and would give us a new point of departure for
a study of the historical relations of orthodox economic
theory to social ideals, reform movements, and ethical
and legal philosophies. To make this clear will be the
purpose of the second Dart of this discussion.
4. Theory of Moral Sentiments, Part VII, Section IV; in 6th ed.,
ii, 395-399.
0. H. TAYLOR
UNIVERSITY OF PENNSYLVANIA


Economics and The Idea of Natural Laws

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